Dbs Bank Ltd, Singapore vs Shailendra Ajmera & Anr

[ arising out of Order dated 24th July, 2019 by NCLT, Mumbai Bench, in M.A. Nos 1721/2019, 1428/2019, 1746/2019 & 1816 of 2019 in CP (IB) No(s). 1371 & 1372 (MB) /2017 ]

In the matter of :

DBS Bank Ltd., Singapore 12, Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982 ... Appellant

Versus

1. Mr. Shailendra Ajmera, the Resolution Professional of Ruchi Soya Industries Limited Ernst & Young LLP, 3rd Floor, Worldmark 1, IGI Airport, Hospitality District, Aerocity, New Delhi.

2. Committee of Creditors Through IDBI Bank IDBI Tower, WTC Complex, Cuffe Parade, Mumbai - 400 005. ...Respondents

Present: For Appellant : Mr. Arun Kathpalia, Senior Advocate with Ms. Anindita Roy Chowdhury, Mr. Raghav Chadha Ms. Neeraj Balakrishnan and Mr. Eklavya Dwivedi, Advocates

Respondents: Mr. Raunak Dhillon and Mr. Ananya Dhar Choudhary, Advocates for 1st Respondent

Mr. Krishnan Venugopal, Senior Advocate with 2

Mr. Uday Rathore, Mr. Nakul Sachdeva and Mr. Aakarshan Sahay, Advocates for 'Committee of Creditors'

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

In the 'Corporate Insolvency Resolution Process' of 'Ruchi Soya

Industries Limited', the 'Committee of Creditors' by majority decision

approved the 'Resolution Plan' submitted by 'Patanjali Ayurved Limited'.

When the matter was placed before the Adjudicating Authority (National

Company Law Tribunal), Mumbai Bench, Mumbai, the Adjudicating Authority

by impugned order dated 24th July, 2019 taking into consideration the

relevant facts and that the plan is in accordance with Section 30(2) approved

the 'Resolution Plan'.

2. Learned counsel for the Appellant submitted that the 'Resolution Plan'

submitted by 'Patanjali Ayurveda Limited' envisaged the payment of Rs. 4134

Crores to the 'Financial Creditors' including the Appellant against admitted

claim of Rs. 8398 Crores approximately. The Appellant extended financial

debt to the 'Corporate Debtor' amounting to USD50 Million (Rs.243 Crores

approximately), secured as a sole first charge on fixed assets of the 'Corporate

Debtor' at Baran, Guna, Daloda, Gadarwara, Mumbai and Kandla. The claim

of the Appellant as admitted by the 'Resolution Professional is Rs. 242.96

Crores.

3. The Appellant's high value security interest would actually cover

around 90% of the Appellant's exposure on enforcement of security.

Accordingly, the appellant requested the 2nd Respondent, the 'Committee of

Company Appeal (AT) (Insolvency) No. 788 of 2019 3

Creditors' take into account the value of its security interests while

considering distribution of proceeds from the 'Resolution Plan'. However, on

23rd April, 2019, the 'Committee of Creditors' arbitrarily and capriciously

approved pari passu distribution of the proceeds ignoring the law and the

Appellant's concerns. Thereafter, at the meeting on 26th April, 2019, the

Appellant voted against the approval of the 'Resolution Plan' submitted by the

'Patanjali Ayurveda Limited'. It was submitted that Section 6 of the

'Insolvency and Bankruptcy Code (Amendment) Act, 2019, which has come

into effect since 16th August, 2019 amends Section 30(2) of the Code and

reads as follows:

30. Submission of resolution Plan.−

(1) ..... .... .... ....

(2) The resolution professional shall

examine each resolution plan received by him to

confirm that each resolution plan -

(a) provides for the payment of insolvency

resolution process costs in a manner specified by

the Board in priority to the [payment] of other

debts of the corporate debtor;

(b) provides for the payment of debts of

operational creditors in such manner as may be

specified by the Board which shall not be less

than−

Company Appeal (AT) (Insolvency) No. 788 of 2019 4

(i) the amount to be paid to such creditors in

the event of a liquidation of the corporate debtor

under section 53; or

(ii) the amount that would have been paid to

such creditors, if the amount to be distributed

under the resolution plan had been distributed in

accordance with the order of priority in sub-section

(1) of section 53,

Whichever is higher, and provides for the

payment of debts of financial creditors, who do not

vote in favour of the resolution plan, in such manner

as may be specified by the Board, which shall not

be less than the amount to be paid to such creditors

in accordance with sub-section (1) of section 53 in

the event of a liquidation of the corporate debtor."

4. According to the Appellant as it has voted against the 'Resolution Plan',

and in terms of amended sub-Section (2)(b)(ii) of Section 30, it is entitled to

minimum amount as payable in the event of 'Liquidation' of the 'Corporate

Debtor', which will be close to 90% of its exposure. It is also submitted that

distribution has not been made giving priority of payment amongst the

creditors in terms of sub-section (1) of Section 53. The 'dissenting secured

creditor' has not been provided the amount in terms of sub-Section (2)(b)(ii)

of Section 30.

5. Learned counsel appearing on behalf of the 'Committee of Creditors'

submitted that the plan of 'Patanjali Ayurveda Limited' having found to be

Company Appeal (AT) (Insolvency) No. 788 of 2019 5

feasible and viable was approved by 'Committee of Creditors' with 96.95%

share of voting on 30th April, 2019. Eventually it was approved by the

Adjudicating Authority on 24th July, 2019. The 'Resolution Plan' was duly

approved by the 'Committee of Creditors' in its commercial wisdom. So far as

amendment to Section 30(2) of the 'I&B Code' is concerned, the learned

counsel for the 'Committee of Creditors' relied on 'Explanation 2' below to

Section 30(2)(b), which reads as under:

"Explanation 2. - For the Purposes of this clause,

it is hereby declared that on and from the date of

commencement of the Insolvency and Bankruptcy

Code (Amendment) Act, 2019, the provisions of this

clause shall also apply to the corporate insolvency

resolution process of the corporate debtor−

(i) where a resolution plan has not

been approved or rejected by the

Adjudicating Authority;

(ii) where an appeal has been preferred

under section 61 or section 62 or

such an appeal is not time barred

under any provision of law for the

time being in force; or

(iii) where a legal proceeding has

been initiated in any court against the

decision of the Adjudicating Authority in

respect of a resolution plan;]"

Company Appeal (AT) (Insolvency) No. 788 of 2019 6

6. From the aforesaid explanation, it is clear that the amendment to

Section 30(2)(b) is applicable only in cases -

(a) where a resolution plan has not been approved or rejected by the

Adjudicating Authority;

(b) where an appeal has been preferred under section 61 or Section

62 or such an appeal is not time barred under any provision of

law for time being in force against the approval or rejection of a

resolution plan by the Adjudicating Authority; or

(c) where a legal proceeding has been initiated in any court against

the decision of the Adjudicating Authority in respect of the

'Resolution Plan'.

7. In the present case the Appellant has not challenged the approval of the

'Resolution Plan' but has challenged the approval of the distribution made

therein. This is also evident from paragraph 6 of the Miscellaneous

Application which has preferred by the Appellant - 'DBS Bank Ltd., Singapore'

before the Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench, Mumbai and reads as follows:

"The Applicant is not challenging the resolution

plan. The Applicant is only challenging the decision of

the CoC as to distribution of the payout under the plan

inter-se between the financial creditors of the corporate

debtor (pursuant to implementation of the plan). This

Hon'ble Tribunal is empowered to review this issue, to

determine if it is compliant with law."

Company Appeal (AT) (Insolvency) No. 788 of 2019 7

As the Appellant is not challenging the 'Resolution Plan', the question

of applicability of amended Section 30(2) does not arise.

8. The manner in which the amount is to be distributed has been

prescribed under amended sub-section (4) of Section 30, is as under:

"30 (4) The committee of creditors may approve

a resolution plan by a vote of not less than

[sixty-six] per cent. of voting share of the

financial creditors, after considering its

feasibility and viability, [the manner of

distribution proposed, which may take into

account the order of priority amongst creditors

as laid down in sub-section (1) of section 53,

including the priority and value of the security

interest of a secured creditor] and such other

requirements as may be specified by the Board:

Provided that the committee of creditors

shall not approve a resolution plan, submitted

before the commencement of the Insolvency and

Bankruptcy Code (Amendment) Ordinance, 2017

(Ord. 7 of 2017), where the resolution applicant

is ineligible under section 29-A and may require

the resolution professional to invite a fresh

resolution plan where no other resolution plan is

available with it:

Company Appeal (AT) (Insolvency) No. 788 of 2019 8

Provided further that where the resolution

applicant referred to in the first proviso is

ineligible under clause (c) of section 29-A, the

resolution applicant shall be allowed by the

committee of creditors such period, not exceeding

thirty days, to make payment of overdue

amounts in accordance with the proviso to clause

(c) of section 29-A:

Provided also that nothing in the second

proviso shall be construed as extension of period

for the purposes of the proviso to sub-section (3)

of section 12, and the corporate insolvency

resolution process shall be completed within the

period specified in that sub-section:]

[Provided also that the eligibility criteria in

section 29-A as amended by the Insolvency and

Bankruptcy Code (Amendment) Ordinance, 2018

shall (Ord. 6 of 2019) shall apply to the resolution

applicant who has not submitted resolution plan

as on the date of commencement of the

Insolvency and Bankruptcy Code (Amendment)

Ordinance, 2018.(Ord. 6 of 2019).]"

9. Amended sub-Section (4) of Section 30 came into force since 16th

August, 2019. It has not been given retrospective effect but is prospective.

Therefore, if the distribution is to be made by the 'Committee of Creditors', it

Company Appeal (AT) (Insolvency) No. 788 of 2019 9

is not necessary to follow the amended sub-section (4) of Section 30, though

it was open to the 'Committee of Creditors' to follow the same principle.

Therefore, the distribution cannot be alleged to be in violation of the amended

sub-section (4) of Section 30.

As per amended Section 30(2)(b)(ii), the distribution is to be made in

the manner as prescribed under Section 53(1) giving preference to the

secured creditor. However, even at that stage no discrimination can be made

between two similarly situated 'secured creditor'.

10. If the 'Financial Creditor' do not accept the 'feasibility' and 'viability' of

the plan and holds that the 'resolution plan' is discriminatory or against the

provision of law, it has right to dissent during the voting and can be treated

as a 'dissenting financial creditor'. However, no 'Financial Creditor' including

a 'secured creditor' can dissent on the ground that if it dissents against the

'resolution plan', inspite of plan being feasible and viable and in accordance

with Section 30(2), just to get the more amount than the other 'secured

creditor' such 'dissenting secured financial creditor' cannot take advantage of

amended Section 30(2)(b)(ii). Therefore, a 'secured creditor' cannot claim

preference over the other 'secured creditor' at the stage of distribution out of

the 'resolution plan on the ground of 'dissenting' or 'assenting', 'secured

financial creditor' otherwise the distribution would be held to be arbitrary and

discriminatory. Section 30(2)(b)(ii) cannot be interpreted in a manner to give

advantage to a 'dissenting secured financial creditor'. In fact Section

30(2)(b)(ii) has been amended only to ensure that 'dissenting financial

creditor' should not get anything 'less than liquidation value' but not for

'getting maximum of the secured assets'.

Company Appeal (AT) (Insolvency) No. 788 of 2019 10

11. In view of the aforesaid finding, no interference is called for against the

impugned order dated 24th July, 2019. The appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

[ Kanthi Narahari ] Member (Technical) New Delhi

18th November, 2019

//ns//

Company Appeal (AT) (Insolvency) No. 788 of 2019